Consignment auctions

Khezr, Peyman; MacKenzie, Ian A.

doi:10.1016/j.jeem.2017.11.003

Cited by 31 publications

(22 citation statements)

References 27 publications

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“…The authors do not make the comparison between free allocation with and without a consignment sale that we make here. Khezr and MacKenzie (2016) find that a consignment auction may lead to a price above that of a revenue-raising auction in the sale of multiple units, such as emissions allowances, but the revenue-raising auction equilibrium price is below the efficient price, so the welfare effects are ambiguous. In an laboratory experiment, Holt and Shobe (2016) find that consignment of only a share of the allowances may lead to a higher price than with consignment of all allowances, which they associate with the competitive equilibrium.…”

Section: Using Consignment Auctions To Facilitate a New Emissions Marketmentioning

confidence: 97%

Consignment Auctions of Free Emissions Allowances Under EPA's Clean Power Plan

Burtraw

McCormack

2016

SSRN Journal

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The initial distribution of emissions allowances is usually thought to be independent of the emissions outcome, but free allocation can affect the efficiency and fairness of allowance trading. Inefficiency may result from thin allowance markets, poor price discovery, and regulatory or organizational complexities that hinder recognition of opportunity costs and innovation. Concerns about fairness may result from lack of access to allowances for some entities and lack of transparency with respect to transfers of substantial value in the program. We explore the role of consignment auctions in mitigating these concerns. These revenue-neutral auctions return revenue to the original allowance holders, whose compliance obligations can be met by reacquiring allowances through purchase. Consignment auctions have minimal administrative costs and do not necessarily involve government. Experience indicates that they can play an important role in a new market. EPA and states could consider consignment auctions in planning for the Clean Power Plan.

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Section: Using Consignment Auctions To Facilitate a New Emissions Marketmentioning

confidence: 97%

Consignment Auctions of Free Emissions Allowances Under EPA's Clean Power Plan

Burtraw

McCormack

2016

SSRN Journal

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“…The consignment auction, also known as the "revenue-neutral" auction, was developed to allow price discovery function, which is the main advantage of auctioning and increasing political feasibility as in grandfathering [14][15][16]. A consignment auction works as follows.…”

Section: Introductionmentioning

confidence: 99%

Price Discovery of Consignment Auctions for Emission Permits

Song

Ahn

2021

Energies

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A consignment auction aims to increase political feasibility by reducing the financial burden of initial permits allocation and to do the role of price discovery. However, previous analytical models presented contradictory results for the price discovery function of a consignment auction. Thus, this study reexamines whether a consignment auction can perform its price discovery function. The study uses a simple game model with several assumptions differentiated from previous analytical models: explicit consideration of the secondary market and firms as price-takers with various behaviors to respond to uncertainty about the price in the secondary market. Firms are classified into three types: speculators who seek arbitrage, doctrinarians who determine a permit demand based on an estimation of their marginal abatement cost, and neutralists who keep a permit demand the same as initial emission endowments. The results reveal that when a consignment auction was introduced, the expected equilibrium price was identical to that of the secondary market price, demonstrating that the auction could deliver the price discovery function. This is because speculators and doctrinarians provide information about their price expectations and marginal abatement cost through their estimated demand functions. Additionally, the smaller number of neutralists is, and the higher the risk-seeking propensity of speculators is, the more effective the price discovery function is.

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“… A consignment auction that combines aspects of free allocation and auctioning into one mechanism has been proposed: see Stavins (), Fowlie (), Burtraw and McCormack () and Khezr and MacKenzie () for further discussion. …”

mentioning

confidence: 99%

“…(See also footnote 9.) In fact, as Burtraw and McCormack () and Khezr and MacKenzie () mention, the inefficiency of tradable emission permits may result from thin emission trading markets, weak price discovery, and regulatory or organizational complexities that hinder recognition of opportunity costs and innovation.…”

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confidence: 99%

Excess Burden of Taxation and Environmental Policy Mix with a Consumer‐Friendly Firm

2019

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This study examines the environmental policy mix of tradable emission permits and emission taxes in a duopoly model with a consumer‐friendly firm. We analyse the interplay of the two policies and the welfare consequences in the presence of excess burden of taxation. We show that an emission tax can be redundant when both the excess burden of taxation and the degree of consumer friendliness are insignificant. However, when the excess burden of taxation is significant, tradable permits policy with tax treatment should be applied to enhance welfare in the presence of a consumer‐friendly firm. Finally, under the tax revenue‐neutral case where the excess burden of taxation does not matter, the environmental policy mix is also efficient if the degree of consumer friendliness is sufficiently high.

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Consignment auctions

Cited by 31 publications

References 27 publications

Consignment Auctions of Free Emissions Allowances Under EPA's Clean Power Plan

Consignment Auctions of Free Emissions Allowances Under EPA's Clean Power Plan

Price Discovery of Consignment Auctions for Emission Permits

Excess Burden of Taxation and Environmental Policy Mix with a Consumer‐Friendly Firm

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